About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Kwazulu-Natal High Court, Durban
SAFLII
>>
Databases
>>
South Africa: Kwazulu-Natal High Court, Durban
>>
2012
>>
[2012] ZAKZDHC 43
|
|
Toll Collect Consortium v South African National Road Agency Ltd and Another (8422/2011) [2012] ZAKZDHC 43 (27 July 2012)
IN
THE KWAZULU-NATAL HIGH COURT
REPUBLIC
OF SOUTH AFRICA
Case
No: 8422/2011
In
the matter between:
THE
TOLL COLLECT CONSORTIUM
…..................................................
Applicant
and
SOUTH
AFRICAN NATIONAL
ROADS
AGENCY LIMITED
…........................................................
First
Respondent
TOLCON
LEHUMO (PROPRIETARY) LIMITED
….....................
Second
Respondent
JUDGMENT
(Delivered
on 27 July 2012)
Vahed
J:
INTRODUCTION
[1]
The
first respondent (SANRAL), subsequent to a tender process
initiated
by it, awarded a contract for the operation and maintenance of the N2
South Coast Toll Plazas within KwaZulu-Natal to
the second
respondent. The applicant submitted a bid during that process but was
not successful and in the present application
challenges that award,
contending that it was flawed and falls to be reviewed and set aside.
Additional relief is also sought directing
the SANRAL to reconsider
the award against the backdrop of this judgment and that the SANRAL's
officials who adjudicated the award
to the second respondent be
precluded from participating in the reconsideration process. This
latter aspect was, in terms of Rule
53(4), added to the original
relief sought.
THE
PARTIES
[2]
The
applicant describes itself as a consortium consisting of three
members,
Procon Fisher (Pty) Ltd, ItraMAS and PG Mavundla Engineering (Pty)
Ltd, which is says was formed for the specific purpose
of submitting
the tender which is the subject of this application and, if
successful, to carry out the operations pursuant thereto.
It records
its principal place of business as being at 100 Ridge Road, Musgrave,
Durban.
[3]
SANRAL
was constituted and incorporated as a public company in
terms
of sections 2 and 3 of the South African National Roads Agency
Limited and National Roads Act, 7 of 1998 ("the SANRAL
Act").
In terms of section 25 of that Act its main functions are to perform
all strategic planning with regard to the South
African national
roads system, as well as the planning, design, construction,
operation, management and rehabilitation of national
roads for South
Africa. The national road network currently consists of approximately
16 170km of roads and SANRAL currently manages
assets with an
estimated replacement value in excess of R186 billion. SANRAL opposes
the relief sought by the applicant
[4]
The
second respondent carries on business as a toll operator and
is
based in Johannesburg. It does not oppose the relief sought.
BACKGROUND
[5]
SANRAL
issued the invitation to tender during March 2010. In
terms
of section 28 of the SANRAL Act it was empowered to enter into
agreements with any person to operate, manage and control toll
plazas
on any toll road and the tender envisaged the conclusion of a
contract for that purpose, for a period of either five or
eight
years, with the successful tenderer.
[6]
The
invitation to tender was accompanied by detailed conditions
and
comprehensive specifications and prospective tenderers were expected
to comply with these. Prospective tenderers, in terms of
the
applicable conditions, were allowed to submit alternative tender
offers. The closing time and date for tenders was initially
stated to
be 14h00 on 08 April 2011 but this was extended by SANRAL to 15 April
2011.
[7]
It
is common cause that the invitation and the tender documents,
including
the tender conditions, were compiled by Tolplan Operations (Pty) Ltd
("Tolplan") who assisted the first respondent
in managing
the tender at its request.
[8]
The
bids were opened at a public meeting, which commenced at
14h00
on 15 April 2011. Four tenderers submitted proposals and in all eight
bids were received by SANRAL. The second respondent
submitted a main
bid and two alternative bids. An entity knows an intertoll did
likewise. The applicant and an entity known as
Baobab Consortium
(Tollink) each submitted a single bid.
[9]
After
initial requests for information as to the award of the tender
had
apparently been ignored the applicant was advised by letter dated 17
June 2001 that ft was unsuccessful and that SANRAL had
approved an
award to the second respondent". . . based on their alternative
No 2 offer for the 8 year operation service period
in the amount of
R164 938 096,55
[10]
That prompted the applicant (through its attorneys of record) to
write to SANRAL in the following terms:
'Our
client has received your letter dated 17 June 2011. Our client is
somewhat surprised at the decision to award the contract
to Tolcon
Lehumo (Pty) Ltd, given that our client's offer on the eight year
contract was significantly cheaper than that of the
successful
tenderer.
It
would appear from your letter to our client that your decision was
premised on the successful tenderers alternate offer. Our
client does
not know the full details of this offer but believes the contents of
this offer did not comply with the tender specifications.
Consequently our client is concerned that it was not given a fair
opportunity to consider a bid on the same terms and conditions
as the
successful tenderer.
Consequently
our client wishes to appeal your decision and notifies you
accordingly.
Please
provide us with details of the appeal process so that we may
prosecute it on our client's behalf.
Please
also provide us with written reasons for your decision in terms of
Section 5 of the Promotion of Administrative Justice Act,
No, 3 of
2000 ("PAJA"), such reasons to include the following
documents:
1.
The tender results.
2.
Tender adjudication reports.
3.
All documents evidencing the evaluation of tender offers.
4.
All other documents which form part of the record of the reasons for
the decision, including if necessary, copies of the other
tenders,
and in particular the successful tenderer's alternate offer.
Although
Section 5 of PAJA allows you 90 days to furnish the reasons, we are
instructed that the successful tenderer will commence
executing
services on 1 July 2011 and consequently our client requests that the
reasons be provided before then in order that our
client can
prosecute its appeal timeously.
Please
also provide us with your written undertaking by no later than 30
June 2011 that you will not proceed with an award of contract,
or
alternatively formalise the appointment of the successful tenderer
until the final determination of our client's appeal and/or
review.'
[11]
SANRAL responded on 4 July 2011 as follows:
'1.
Your
letter dated 27 June 2011 has reference. We respond as follows.
2.
We bring the following matters to your attention which your client
should take under consideration before pursuing this further.
3.
It seems that your client has made some incorrect assumptions and
unfounded assertions, as detailed hereunder.
(i)
Your client has made an assumption that its pricing was lower than
the tender price of the Tolcon Lehumo alternative 2 offer.
It is
pointed out that your client's tender price as per the schedule of
payments/cost matrix for the 8 year contract option was
R156 407
020.40 (excluding VAT) as compared to R144 682 540,83 for the Tolcon
Lehumo alternative 2 offer. The Tolcon Lehumo tender
price was thus
lower.
(ii)
Your client asserts that the Tolcon Lehumo alternative 2 offer did
not meet the technical specifications, and this with the
acknowledgement that they do not know the details of the tender
offer. This plainly constitutes a baseless and unfounded assertion.
4.
We
trust that the above is in order and confirm that our rights remain
reserved.'
[12]
The applicant's attorneys were not satisfied with that response and
after further correspondence attorneys representing SANRAL
wrote on
its behalf on 12 July 2011 in the following terms:
'1
We
refer to the above matter and to your letter dated 11 July 2011.
2.
In
so far as the contents of your letter under reply are concerned, we
are
instructed
that -
2.1.
the
reasons for our client not awarding the tender in the above
matter
to your client are the following -
2.1.1.
in
terms of the Conditions of Tender, as read with the Tender
Data,
our client evaluated tenders using the valuation methodology
contemplated in Method 4, in terms whereof our client, in the
first
instance, scored quality, rejecting all tender offers that failed to
score the minimum number of points for quality as stated
in the
Tender Data. Tenders received with scores for quality below 75% were
not evaluated further. Your client's tender did not
meet the quality
thresholds set out in clause F.3.11.3 of the Conditions of Tender,
applicable to the first stage of the tender
adjudication process, as
contained and detailed in the Conditions of Tender. The basis for
your client's tender failing to meet
the quality standards is its
inexperience in toll operations, more particularly, in the management
of toll operations;
2,1.2.
consequently
and based on the adjudication contemplated in
Method
4 and as addressed above, your client's financial offer and which is
associated with the costs of providing your client's
services, was
not evaluated further. Our client has already notified your client
that your client's tendered price was, in any
event, more expensive
than the price offered by the successful tenderer. In this regard we
are instructed to confirm the price
of the successful tenderer was
8,1% less than the price tendered by your client;
2.2.
not all the returnable schedules to be submitted by your client were
initially complete: in so far as there was no information
concerning
insurance cover, banking details, work experience, distribution of
the risk between the operating party and the toll
system party, valid
black economic empowerment verification certificates and copies of
preferencing schedules for use of labour
and targeted enterprises.
Whilst your client did, upon our client's request, furnish the
majority of the outstanding information,
the black economic
empowerment verification certificates were not provided;
2.3.
as you have, on behalf of your client, questioned the award based on
an alternative tender offer, we draw your client's attention
to the
provisions of clause F.2.12 of the Conditions of Tender in terms of
which our client may accept an alternative offer provided
the
tenderer also submitted a compliant main tender offer. Our client
confirms that the successful tenderer also submitted a compliant
main
tender offer. All tenderers, including your client, where entitled to
submit alternate tender offers;
2.4.
there is no urgency in this matter as, on your client's own version,
it was asking for details concerning the reason/s for
the award of
the tender "as far back as 15 June 2011";
2.5.
with regard to your client having been advised on 17 June 2011 that
its tender was not successful and that the contract was
awarded on 9
June 2011 to the successful tenderer, we draw your client's attention
to the provisions of clause F.3.14 of the Conditions
of Tender, which
provide that tenderers whose tenders were not accepted will be
advised thereof after the successful tenderer has
acknowledged "the
Employer's", being our client, notice of acceptance. As
indicated in our letter to you of 8 July 2011,
the contract was
awarded on 9 June 2011, with a commencement date of 10 June 2011. The
successful tenderer acknowledged their acceptance
of the tender on 15
June 2011 and your client was advised of the fact that it was
unsuccessful on 17 June 2011. As is apparent
to you, this conforms
with the requirements of the Conditions of Tender which your client
accepted in submitting its tender. It
therefore follows that your
client's belief relating to the "circumvention" of its
rights is unfounded;
2.6.
there has equally been no "circumvention" of the Conditions
of Tender and your client's allegations in this regard
are, yet
again, unfounded;
2.7.
your client was advised of the status of the award of the tender in
our client's letter dated 17 June 2011 and in our client's
letter of
4 July 2011 our client addressed incorrect assumptions contained in
your letter dated 27 June 2011. There has not therefore
been any
"circumvention" of your client's rights. In so far as your
client wishes to "complain about the award",
then it is
free to do so in the ordinary course;
2.8.
there is no reason why or basis on which our client is not entitled
to appoint Tolcon Lehumo (Proprietary) Limited ("Tolcon")
as the successful tenderer;
2.9.
there is/are no basis/es on which our client should validly and
lawfully instruct Tolcon to continue operating in terms of
its
previous contract. In any event, this contract is no longer in force.
Tolcon is currently providing services to our client
in terms of a
current and enforceable contract and has been doing so unlawfully
since 10 June 2011.'
[13]
Thereafter further correspondence was exchanged, the applicant
insisting on being supplied with further information and documents
(including the second respondent's tender documents and the tender
adjudication reports and evaluation documents), with the first
respondent remaining steadfast in its assertion that the applicant
was not entitled to those documents.
[14]
Those facts then set the backdrop against which the present
application was launched on 28 July 2011. In terms of Rule 53
the
applicant called upon the first respondent to lodge the record of
the proceedings sought to be set aside and additionally
called upon
it to furnish "... such reasons which it may desire to give
[15]
On 18 August 2011 the applicant delivered its additional affidavit
in terms of Rule 53(4). That affidavit disclosed the follow
further
interactions that had occurred subsequent to the launching of the
application.
a.
Prior
to lodging the record the first respondent required that
the
applicant sign a detailed confidentiality undertaking
prepared by it.
b.
The
applicant declined to do so but instead indicated that it
would
undertake to confine the use of the information provided in
the
record to the context of these proceedings.
c.
Thereafter
the first respondent delivered 11 lever arch files of
documents,
which it contended formed the record. The applicant's
affidavit
delivered in terms of Rule 53(4) reveals that those files
contained
i.
The
Project Document prepared by the first respondent;
ii.
The
unsuccessful tenders submitted by Intertoll Africa;
iii.
The
tender submitted by the applicant;
iv.
A
'so-called' 'adjudication document'.
d.
The
applicant went on to maintain that the files did not contain
any
"... adjudication or evaluation reports or any
documentation of
any nature stating the reasons for the First
Respondent's decision
in respect this matter. . .".
[16]
On 14 August 2011 the applicant's attorneys indicated to the first
respondent's attorneys that the record was deficient in
that it did
not contain,
inter
alia,
the
second respondent's tender, the evaluation reports, the adjudication
reports, Tolplan's recommendations and other documents
evidencing
reasons for the decision and called for immediate delivery of those
documents.
[17]
During a subsequent telephone conversation between the respective
attorneys on 15 August 2011 the first respondent's attorney
advised
that legible copies of the evaluation and adjudication reports were
being sourced and would be forwarded by the morning
of 16 August
2011.
The
applicant's attorney was also advised that the first respondent's
tender documents would not be forthcoming uniess the original
confidentiality undertaking sought was furnished and that the
applicant's attorneys undertook not to disclose the contents of
the
first respondent's tender documents to the applicant.
[18]
Later the same day the first respondent's attorneys wrote to the
applicant's attorneys indicating that no further documents
would be
delivered until that undertaking was furnished.
[19]
On 24 August 2011 the first respondent delivered two reports to the
applicant. These have been styled and dealt with in these
proceedings as the 'Evaluation Report' and the 'Adjudication
Report". The Evaluation Report was compiled by Tolplan and
signed off by it on 16 May 2011. The Adjudication Report was
prepared by the first respondent and is dated 8 June 2011.
[20]
On 16 September 2011 the applicant delivered a supplementary
affidavit in terms of Rule 53(4) dealing with the contents of
those
reports.
[21]
Thereafter the answering and replying affidavits were delivered on
or about 10 October 2011 and 4 November 2011 respectively.
On or
about 17 February 2012 the first respondent delivered a
supplementary affidavit the purpose of which was essentially to
complain about new material in the replying affidavit and to contend
that such new material ought to be struck out. It was suggested
that
this would be done at the hearing of the application.
[22]
The matter was argued before me as an opposed motion on 6 and 7
March 2012. At the hearing, the suggested application to
strike out
was not persisted in by the first respondent.
LOCUS
STANDI
&
JURISDICTION
[23]
In their heads of argument Mr
Leech
SC
who together with Mr
Boulle
appeared
for the first respondent raised two preliminary points. At the
opposed hearing these points were not argued separately.
They were
dealt with as part of the main argument delivered on the behalf of
the first respondent. However it is convenient to
deal with them
now.
[24]
The first preliminary point related to the standing of the
applicant. It was contended that the applicant lacked
locus
standi
on
two footings, firstly as a consortium it for that very reason did
not have standing and secondly, because the applicant could
not
demonstrate a cognisable legal interest in the application and its
outcome it, for that reason too, lacked
locus
standi.
[25]
In my view the founding affidavit clearly described the applicant
with sufficient reference to its three members and clearly
identified a business address in Durban. In addition it stated that
those three members associated themselves as the applicant
for the
specific purpose of submitting the proposal and, if successful to
carry out the operations envisaged. In simple terms
it is nothing
more than a partnership for the limited purpose. There is nothing
wrong in law with that.
[26]
The second leg to the argument on standing is inextricably linked to
the main argument relating to why the applicant failed
in its bid.
Because it failed, so the argument went, it had no real interest
(described as a cognisable legal interest) in the
tender and
therefore in the outcome of the application. Because then it had no
interest to protect or pursue it was argued that
it had no standing.
The argument is a circular one and contains in it the seeds of its
own weakness. Either the applicant has
a right to challenge the
non-award of the tender to it or not. In my view it has that right.
[27]
Accordingly the challenge to standing must fail.
[28]
The second preliminary point concerned jurisdiction. It was argued
that this court does not have jurisdiction because the
applicant's
contention that the adverse effect of the decision is one that will
be felt within the area of this court's jurisdiction
is incorrect. I
do not agree. Firstly, the applicant has indicated, and this is not
challenged, that for the purposes of conducting
its business it has
selected an address in Durban. That that address coincidently
happens to be also the address of one of its
members is of no
moment. Secondly, all of the work to be performed and envisaged by
the tender is work that will be performed
within the area of this
court's jurisdiction. Thirdly, all income generated and earned by
that work will be income generated
and earned within the area of
this court's jurisdiction.
[29]
So too the challenge relating jurisdiction must also fail.
THE
PRINCIPAL ISSUES AND SOME PRELIMINARY OBSERVATIONS
[30]
Mr
Olsen
SC,
who together with Mr
Voormoien
appeared
for the applicant delivered an argument that marginally flirted with
the applicant's heads of argument. After initially
complaining about
this approach Mr
Leech
elected
to proceed with the first respondent's argument and that approach
resulted in the matter spilling over into a second day
of argument.
Mr
Olsen's
fresh
approach to the applicant's argument is also partially the reason
for the delay in the delivery of this judgment (an intervening
six
week busy criminal circuit also not assisting) but I mention that
not as an excuse but as an indicator more of the need for
me to
properly grasp the import of those new submissions.
[31]
In evaluating the issues in this matter it is convenient to commence
with section 217 of the Constitution. It provides:
'217
Procurement
(1)
When an organ of state in the national, provincial or local sphere
of government, or any other institution identified in national
legislation, contracts for goods or services, it must do so in
accordance with a system which is fair, equitable, transparent,
competitive and cost-effective.
(2)
Subsection (1) does not prevent the organs of state or institutions
referred to in that subsection from implementing a procurement
policy providing for-
(a)
categories of preference in the allocation of contracts; and
(b)
the protection or advancement of persons, or categories of persons,
disadvantaged by unfair discrimination.
(3)
National
legislation must prescribe a framework within which the
policy
referred to in subsection (2) must be implemented.'
[32]
The national legislation referred to in sub-section (3) is the
Preferential Procurement Policy Framework Act, 5 of 2000 ("the
PPPF Act"). Section 2 of the PPPF Act provides as follows:
'2
Framework for implementation of preferential procurement policy
(1)
An organ of state must determine its preferential procurement policy
and implement it within the following framework:
(a)
A preference point system must be followed;
(b)
(i) for contracts with a Rand value above a prescribed amount a
maximum of 10 points may be allocated for specific goals as
contemplated in paragraph
(d)
provided
that the lowest acceptable tender scores 90 points for price;
(ii)
for contracts with a Rand value equal to or below a prescribed
amount a maximum of 20 points may be allocated for specific
goals as
contemplated in paragraph
(d)
provided
that the lowest acceptable tender scores 80 points for price;
(c)
any other acceptable tenders which are higher in price must score
fewer points, on a
pro
rata
basis,
calculated on their tender prices in relation to the lowest
acceptable tender, in accordance with a prescribed formula;
(d)
the specific goals may include-
(i)
contracting
with persons, or categories of persons, historically
disadvantaged
by unfair discrimination on the basis of race, gender or
disability;
(ii)
implementing
the programmes of the Reconstruction and
Development Programme as
published in
Government
Gazette
16085
dated
23 November 1994;
(e)
any specific goal for which a point may be awarded, must be clearly
specified in the invitation to submit a tender;
(f)
the contract must be awarded to the tenderer who scores the highest
points, unless objective criteria in addition to those
contemplated
in paragraphs
(d)
and
(e)
justify
the award to another tenderer; and
(g)
any contract awarded on account of false information furnished by
the tenderer in order to secure preference in terms of this
Act, may
be cancelled at the sole discretion of the organ of state without
prejudice to any other remedies the organ of state
may have.
(2)
Any
goals contemplated in subsection
1(e)
must
be measurable, quantifiable and monitored for compliance.'
[33]
A constant theme that underpinned the applicant's argument was the
link forged between section 217 of the Constitution and
section
2(1)(f) of the PPPF Act, the submission being that that link was not
a marriage of convenience and one that was not evident
in the first
respondent's evaluation of the tenders received.
[34]
Before proceeding I need to dispose of a preliminary complaint made
by the applicant. That complaint related to what was
described as a
distinct reluctance on the part of the first respondent to assist
the applicant in the adjudication and challenge
processes and
focussed on the first respondent's delay in furnishing the relevant
documents and its refusal to make the second
respondent's bid
document available for scrutiny and comparison. ! have much sympathy
for the submission that absent the second
respondent's tender
documents the applicant (and indeed the court) is significantly
hamstrung in making an objective assessment
of the tender process.
It was also submitted that it may turn out that I would be unable to
properly assess if the applicant
had fairly failed in its bid.
[35]
However the applicant had available remedies to insist upon the
production of the second respondent's bid documents and chose
to
persist in the application without exhausting all those remedies. If
it fails in the application for that reason alone then
it only has
itself to blame. Before leaving this point I must add that it was
singularly unhelpful of the first respondent to
have suggested (in
correspondence) that the applicant, if it wanted access to the first
respondent's bid documents, ought to
have employed the remedies
provided for in the Promotion of Access to Information Act, 2 of
2000 (although recourse to that Act
was first suggested by the
applicant) or that it ought to have provided the confidentiality
undertakings sought. The first respondent
had a constitutional
obligation to conduct its operations transparently and accountably.
In
Transnet
Ltd & Ano v SA Metal Machinery Co (Pty) Ltd
2006
(6) SA 285
(SCA) similar points were dealt with by
Howie
P thus:
'[53]
The submission of the appellant on this aspect was that disclosure
of the rates, being components of the tender price, would
breach the
confidentiality clause and expose the appellant to an action by
Inter Waste either for damages or at least for cancellation
of the
contract.
[54]
The respondent's contention was that only the tender price itself
was referred to in the confidentiality clause and as Inter
Waste had
(as was indeed the case) consented to disclosure of the tender
price, the clause was no longer a bar to disclosure
of that sum. The
clause therefore never had any bearing on the schedule of prices and
quantities. In any event, so the contention
went, any action for
breach of the clause would need to entail proof of a material breach
with or without proof of damages. For
the same reason for contending
in respect of s 36(1
)(c)
that
there was no probable harm reasonably to be expected, and more
importantly because there was no appeal against the Court's
finding
that no harm was likely in respect of s 36(1){7)J, disclosure could
not realistically expose the appellant to an adverse
judgment for
contractual relief.
[55]
To my mind the overriding consideration here is that the appellant,
being an organ of State, is bound by a constitutional
obligation to
conduct its operations transparently and accountably. Once it enters
into a commercial agreement of a public character
like the one in
issue (disclosure of the details of which does not involve any risk,
for example, to State security or the safety
of the public) the
imperative of transparency and accountability entitles members of
the public, in whose interest an organ of
State operates, to know
what expenditure such an agreement entails. 1 therefore fail to see
how the confidentiality clause could
validly protect the successful
tenderer's tender price from disclosure after the contract has been
awarded. Accepting a need
for confidentiality in the pre-award
phase, it seems to me that the intention of the drafter of the
notice was no more than that
a tenderer should not be able to know a
competing tenderer's price in that period, hence the reference to
'other tendered prices'.
In the context of the notice the tender
price contemplated as protected by confidentiality was the total
price without component
details. It follows that once the contract
was awarded the confidentiality clause, certainly insofar as the
successful tenderer
was concerned, was a spent force and offered
Inter Waste no further protection from disclosure as regards its
tender price. (I
refrain from considering the question whether the
clause continued to protect the unsuccessful tenderers.)
[56]
Moreover, the agreement, in incorporating the tender documentation
also incorporates the schedule of prices and quantities.
The
agreement is not Inter Waste's document. It is a contract document
to which the appellant, a public body, is a party. What
applies to
public entitlement to know the contract price applies equally, on
the facts of this case, to the agreement itself.
What is more, the
tender documentation included the agreement in draft. Inter Waste
must have known in advance that its schedule
of prices and
quantities would, if it secured the contract, become part of the
agreement and therefore exposed to public scrutiny.
Accordingly,
even if 'tender price' in the notice included the schedule, the
parties' intention could never have been to maintain
confidentiality
in respect of the rates after the award. Parties cannot circumvent
the terms of the Act by resorting to a confidentiality
clause.
1
PRICE
[36]
It was common cause that the first respondent is an organ of State
and as such section 2 of the PPPF Act read with section
217 of the
'
Constitution applies to its procurement endeavours. The contract in
question in this application is of a value that attracts
the
application of section 2(1)(b)(i) of the PPPF Act. It was argued
that whilst sections 2(1 )(d) and (e) are important, it
was vital to
observe the provisions of section 2(1)(f) of the PPPF Act. Thus,
before paying attention the criteria set out in
sections 2(1)(d) and
(e) and other
objective
criteria
it
was important to first determine the role played by price alone in
ranking competing tenderers.
[37]
The tender document was designed such that in that portion of the
document which contained the contractual offer to be made
by a
prospective tenderer ("Form of Offer") the contract price
was required to be expressed in a Rand amount inclusive
of Value
Added Tax ("VAT"). Elsewhere in the tender documents, in
the section styled
Schedule
of Payments/Cost Matrix
("the
cost matrix") the items there were required to be expressed
exclusive of VAT. The total of the items in the applicant's
cost
matrix, ie. the price arrived at, was identical to the figure
included in the Form of Offer.
[38]
An assessment as to whether the applicant or the second respondent
submitted the cheaper bid turns exclusively on the manner
in which
the evaluation and recommendation by Tolplan and the adjudication by
the first respondent assessed the applicant's treatment
of price in
its bid documents. In other words, did the applicant's price include
VAT or not?
[39]
In
their evaluation Tolplan treated it thus:
There
were Vat calculation Errors (sic) on the Form of Offer if compared
to the Schedule of Payments/Cost for the ... Tender Offers
submitted.
The
Offer amounts in the Form of Offer was (sic) the same amount as
their Schedule of Payments/Cost Matrix which excludes VAT
for their.
. . Tender Offers submitted. Therefore VAT was excluded from their
Form of Offer, hence the difference between the
Tendered Amount and
the Corrected Amount'
And
in their adjudication of Tolplan's evaluation and recommendations
the first respondent dealt with it thus:
'The
corrections made to the tender offers received from . . . Toll
Collection (sic) Consortium was to include VAT on the Form
of Offer
which they omitted to include from the Schedule of Payments/Cost
Matrix which was exclusive of VAT.'
[40]
The result was that the applicant's tendered price of R156 407
020,40 as contained in its Form of Offer was treated as being
a VAT
exclusive 'Corrected Amount' for the purposes of comparison with the
second respondent's VAT exclusive tender price of
R144 682 546,82.
[41]
The applicant's case is that its price was confirmed at the tender
opening meeting as being VAT inclusive but nevertheless
argues that
it was illogical, irrational and unsustainable for the first
respondent to simply correct what it regarded as being
the incorrect
figure. Instead it ought to have approached the applicant because
the situation cried out for clarity.
[42]
In
Logbro
Properties CC v Bedderson NO & Ors
2003
(2) SA 460
(SCA) Cameron JA said:
'[8]
This is not to say that the conditions for which the province
stipulated in putting out the tender were irrelevant to its
subsequent powers. As will appear, such stipulations might bear on
the exact ambit of the ever-flexible duty to act fairly that
rested
on the province. The principles of administrative justice
nevertheless framed the parties' contractual relationship, and
continued in particular to govern the province's exercise of the
rights it derived from the contract.
[9]
Counsel's invocation of . . .
[Cape
Metropolitan Council v Metro Inspection Services (Western Cape) &
Ors
2001
(3) SA 1013
(SCA)] ... as authority to the contrary is mistaken.
There it was held that a local authority's cancellation of an
agreement
was not 'administrative action' under the Constitution
entitling the other contractant to procedural fairness before
termination.
Although the public authority derived its power to
conclude the contract from statute, it was held that the same could
not necessarily
be said about its power to cancel. But the
Cape
Metropolitan
case
turned on its own facts, and this Court was careful to delineate
them. In the first place, the tender cases were expressly
distinguished. Second, the employment cases (where a public
authority's express statutory power to dismiss public sector workers
was held bound by public duties of fairness notwithstanding that a
corresponding right existed at common law or that such a right
might
also have been contained in a contract) were also distinguished.
Third and most importantly, the Court in
Cape
Metropolitan
did
not purport to provide a general answer to the question whether a
public authority in exercising powers derived from a contract
is in
all circumstances subject to a public duty to act fairly. That
question was left open. Instead, the Court's judgment makes
it plain
that the answer depends on all the circumstances. The critical
passage in the reasoning of Streicher JA is this:
"Those terms
[ie entitling the public authority to cancel the contract] were not
prescribed by statute and could not be dictated
by the [public
authority] by virtue of its position as a public authority. They
were agreed to by the first respondent, a very
substantial
commercial undertaking. The [public authority], when it concluded
the contract, was therefore not acting from a position
of
superiority or authority by virtue of its being a public authority
and, in respect of the cancellation, did not, by virtue
of its being
a public authority, find itself in a stronger position than the
position would have been had it been a private institution.
When it
purported to cancel the contract it was not performing a public duty
or implementing legislation; it was purporting to
exercise a
contractual right founded on the consensus of the parties in respect
of a commercial contract. In all these circumstances
it cannot be
said that the [public authority] was exercising a public power."
[10]
The case is thus not authority for the general proposition that a
public authority empowered by statute to contract may exercise
its
contractual rights without regard to public duties of fairness. On
the contrary: the case establishes the proposition that
a public
authority's invocation of a power of cancellation in a contract
concluded on equal terms with a major commercial undertaking,
without any element of superiority or authority deriving from its
public position, does not amount to an exercise of public power.
[11]
in the present case, it is evident that the province itself dictated
the tender conditions, which McLaren J held constituted
a contract
once the tenderers had agreed to them. The province was thus
undoubtedly, in the words of Streicher JA in Cape
Metropolitan,
'acting
from a position of superiority or authority by virtue of its being a
public authority' in specifying those terms. The
province was
therefore burdened with its public duties of fairness in exercising
the powers it derived from the terms of the
contract.'
[43]
That was treated with approval in
Metro
Projects CC & Ano v Klerksdorp Local Municipality & Ors
2004
(1) SA 16
SCA in the following fashion:
'[13]
In the
Logbro
Properties
case
. . . , paras [8] and [9] at 466H - 467C, Cameron JA referred to the
'ever-flexible duty to act fairly' that rested on a
provincial
tender committee. Fairness must be decided on the circumstances of
each case, ft may in given circumstances be fair
to ask a tenderer
to explain an ambiguity in its tender; it may be fair to allow a
tenderer to correct an obvious mistake; it
may, particularly in a
complex tender, be fair to ask for clarification or details required
for its proper evaluation. Whatever
is done may not cause the
process to lose the attribute of fairness or, in the focal
government sphere, the attributes of transparency,
competitiveness
and cost-effectiveness."
and
in
Minister
of Social Development & Ors v Phoenix Cash & carry - PMB CC
[2007]
3 All SA 115
(SCA), thus:
'[19]
f have quoted clauses 17.2, 17.6 and 17.7 of the Terms of Reference
because they are relevant to a proper understanding
of clause 17.10.
The first affords the
Department
the flexibility of investigating the financial substance of a
service provider. When the applicant submitted its tender
every
supporting document from the bank and its suppliers invited the bid
committee to contact the writer should any further
information be
required. The opportunity properly to evaluate a bid which was on
the face of it markedly superior to the tenders
of the respondents
was however spurned. The remarks of Conradie JA in
Metro
Projects CC v Klerksdorp Local Municipality
2004
(1) SA 16
(SCA) at paragraph 13 bear repeating:
"In
the
Logbro
Properties
case
supra,
paras
[8] and [9] at 466H-467C, Cameron JA referred to the 'ever-flexible
duty to act fairly' that rested on a provincial tender
committee.
Fairness must be decided on the circumstances of each case. It may
in given circumstances be fair to ask a tenderer
to explain an
ambiguity in its tender; it may be fair to allow a tenderer to
correct an obvious mistake; it may, particularly
in a complex
tender, be fair to ask for clarification or details required for its
proper evaluation. Whatever is done may not
cause the process to
lose the attribute of fairness or, in the local government sphere,
the attributes of transparency, competitiveness
and
cost-effectiveness."
The
second- and third-mentioned clauses illustrate that the process was
intended to encourage bidders with little or no financial
history.
But the process followed by the committee treated each item of
evidence mentioned in clause 17 as peremptory and the
whole as
excluding reliance on any not specifically mentioned. By doing so it
failed to appreciate that audited financial statements
might
reasonably be inapplicable to a small business only beginning to
find its feet or to a consortium without a previous history.
Thereby
it potentially shut out or discouraged the very interests which
clauses 17.6 and 17.7 were intended to attract.'
[44]
The applicant's
Form
of Offer
(which
is an integral portion of the bid) assumes a particular significance
when considering the treatment given to
price
by
the first respondent. That document is clear in its terms that the
price stated therein is VAT inclusive. It is addressed to
the first
respondent and in addition to offering to perform the contract at a
VAT inclusive price of R156 407 020,40 also indicated
that the first
respondent:
'.
.. may accept [the] Offer by signing and returning to the
[applicant] one copy of the acceptance part of the Forms of Offer
and Acceptance before the end of the period of validity stated in
the Tender Data, (or at the end of any agreed extension thereof)
whereupon the [applicant] becomes the party named as the contractor
in the conditions of contract identified in the contract
data.'
[45]
The whole tenor of the
Form
of Offer
document
suggests that it is a firm promise and that upon acceptance becomes
a binding contract.
BEE
VERIFICATION
[46]
In its letter of 12 July 2011 the first respondent indicated that
one of the reasons for the tender not being awarded to
the applicant
was its failure to comply with the tender requirement of furnishing
appropriate verification certificates relating
to Black Economic
Empowerment ("BEE") milestones. Such certificates that
were provided were from an agency that had
not been accredited at
the time of submission.
[47]
It has been pointed out by the applicant that tender condition
F.3.11.4(i)(e) provided that ". . , if a tenderer . .
. failed
to submit an acceptable Verification Certificate, a period of 24
hours [would] be granted to re-submit a valid Verification
Certificate." It claimed that it was not afforded that
opportunity.
[48]
In its adjudication report however, after recording the applicant's
failure to submit appropriate BEE Verification Certificates,
the
first respondent concluded that the ". . . required information
was subsequently provided and the initial omission .
. . was not
considered materia!". In addition, and in its answering
affidavit the first respondent indicated that the issue
of BEE
scoring was irrelevant to the decision to exclude the applicant.
Nothing more needs saying on this score.
QUALITY
OR FUNCTIONALITY
[49]
The principal thrust of the first respondent's defence was that the
applicant did not score the minimum of 75% when assessed
for
quality.
[50]
in dealing with the question of quality in the evaluation and
adjudication reports Tolplan and the first respondent assessed
this
under a number of separate elements, which in turn were broken down
into a number of further sub-elements. The three principal
elements
were
Toll
Operations
which
was allocated a score of 45 points,
Toil
System
which
was allocated a score of 50 points and
Electrical
and Mechanical Systems
which
was allocated a score of 5 points.
Toil
Operations
was
split into
Organisational
Structure
(20
points) and
Operations
Management
(25
points).
Toll
System
was
split into
Organisational
Structure
(5
points) and
Risk
Management
(45
points).
[51]
The 20 points for
Organisational
Structure
was
assessed in three further sub-categories with 5 points being
allocated for
Proposed
Route Organogram,
5
points for
Quality
of Key Personnel
and
10 points for
Staff
Salaries.
The
25 points for
Operations
Management
was
assessed in six further sub-categories with 5 points being allocated
for
Financial
Management,
5
points for
Traffic
Management,
5
points for
Risk
Management,
5
points for
QA
Management,
2,5
points for
Environmental
Management
and
2.5 points for
Safety
and Security.
The
45 points for the
Risk
Management
portion
of
Toll
System
was
assessed in six further subcategories with 4 points being
allocated for
Risk
Management,
3
points for
Quality
Assurance,
1
point for
Environmental
Management,
5
points for
Past
Performance,
2
points for
Toll
System Rollout Programme
and
30 points for
Other:
Toll System Technical Analysis.
[52]
in the tender document prospective tenderers were told of the three
principal elements but not of the further sub-elements
and their
subcategories.
A
FAIR AND OBJECTIVE AWARD
-
DISCUSSION
AND CONCLUSIONS
[53]
As an organ of State the first respondent was obliged to comply with
the provisions of section 217 of the Constitution read
with section
2 of the PPPF Act. In doing so it was, in my view, incumbent upon it
to first look at price and award the tender
on the basis of price
being the dominant factor (ie. 90%) unless
objective
criteria
and
clearly
identified specific goals
justifies
the award to a more expensive tenderer.
[54]
When dealing with the applicant's price it is difficult to
understand why the first respondent chose unilaterally to do what
it
did and why it did not seek clarity as to whether the price stated
in the Form of Offer did indeed include VAT instead of
simply
assuming that it did not.
[55]
In making that assumption the first respondent did not act
rationally. I agree with the submission that a rational decision
maker would have applied the terms contained in the Form of Offer
(they resulted in a binding contract) taking into account the
oral
confirmation of the fact that the price included VAT. Alternatively,
the situation demanded that clarity be sought. In seeking
such
clarity, and based on the authorities referred to above where
price
is
discussed, the first respondent would have been observing its "..
. ever-flexible duty to act fairly.. .".
[56]
In unilaterally altering (correcting) the applicant's price the
first respondent embarked on administrative action that was
not
rationally connected with the information before it and thus also
offended section 217 of the Constitution.
[57]
Had the applicant's price been properly treated and accorded the
prominence due to it the applicant, as the lowest tenderer,
would
have achieved a score of 90 points for price alone.
[58]
On this limited ground the award of the tender to the second
respondent falls to be reviewed and set aside.
[59]
I turn now to consider the first respondent's actions insofar as
Quality or Functionality are concerned.
[60]
I have observed that the tender documents did not disclose the
details as to how the divers criteria (and their respective
sub-categories) could be achieved by prospective tenderers. Not only
were the criteria and subcategories not disclosed,
more
importantly the weightings to be attached to each were unknown.
[61]
I indicated earlier that the question of price was almost all
important unless
objective
criteria
and
clearly
identified specific goals
justifies
the award to a more expensive tenderer. In my view that observation
is a natural conclusion drawn from an analysis of
section 217 of the
Constitution read with section 2 of the PPPF Act. It follows
therefore that the first respondent had to clearly
identify and
specify those objective criteria and goals. That had to be done in a
manner that left no doubt or room for debate
as to whether the
criteria and the assessment of the specified goals were objective in
nature.
[62]
In my view it was incumbent upon the first respondent to set out all
the benchmarks up front. In other words, a tenderer
must know how to
achieve the predetermined scoring. See
Benlou
Properties (Pty) Ltd v Vector Graphics (Pty) Ltd
[1992] ZASCA 158
;
1993
(1) SA 179
(A) at 189 E-H.
[63]
In dealing with this aspect Mr
Leech
relied
on the following passage in
Minister
of Environmental Affairs and Tourism & Ano v Scenematic Fourteen
(Pty) Ltd
[2005] ZASCA 11
;
2005
(6) SA 182
(SCA):
([17]
A related contention, and one that found favour with the Court
a
quo,
was
that the adoption of a set of criteria for each group and a system
of scoring for the assessment of the criteria had the effect
of
precluding the decision-maker from properly exercising his
discretion. Counsel for the respondent relied in this regard on
s
6{2)(c),
(d)
and
(f)
of
PAJA and a number of decisions in support of the proposition that,
while a functionary may have regard for guidance to a predetermined
rule of which it approves, it would not be exercising its discretion
if it treated the rule as a hard and fast one to be applied
as a
matter of course in every case. (See
Johannesburg
Town Council v Norman Anstey & Co
1928
AD 335
at 340;
Computer
Investors Group !nc and Another v Minister of Finance
1979
(1) SA 879
(T) at 898D -E;
Hofmeyr
v Minister of Justice and Another
1992
(3) SA 108
(C) at 117F - H.) The position must necessarily be
somewhat different where the decision-maker is faced with a large
volume of
competing applications and the need for consistency
becomes an imperative requirement for fairness. The
Bato
Star Fishing
case
supra
was
concerned with the same allocation process as the present, but in
relation to the
quantum
of
the quotas granted in the hake deep-sea trawling sector. After
quoting a passage in the judgment of Human J in
Computer
Investors Group Inc and Another v Minister of Finance (supra
at
898C - E) in which the teamed Judge reformulated the proposition
referred to above in relation to the adherence to hard and
fast
rules, O'Regan J said the following (at para [57]):
"In
circumstances such as these, moreover, where the decision-maker is
seeking to evaluate a large number of applications
against similar
criteria, the
dictum
in
the
Computer
Investors Group
case
[at 898C - E] is not relevant. In cases such as the present, it will
be permissible, and indeed will often be desirable,
for
administrative decision-makers to adopt and apply general criteria
evenly to each application in order to ensure that the
decision
subsequently made is fair and consistent."
As
previously indicated, a feature of the method adopted was in any
event the provision for adjustment in circumstances where
the
criteria and weighting were for any reason inappropriate. It follows
that, in my view, the adoption of a set of criteria
and a system of
scoring for their assessment cannot be faulted. On the contrary, the
method strikes me as one which was objective,
rational and practical
in the circumstances.
[18]
A further point made by the respondent was that the applicants for
fishing rights ought to have been told in advance of the
procedure
to be adopted, involving as it did the streaming of the applications
into two groups and the use of a scoring system
applied to
predetermined criteria. It was argued that the failure on the part
of the DDG properly to advise applicants rendered
the allocation
process procedurally unfair. Section 3(2)fa) of PAJA expressly
provides that what is procedurally fair depends
on the circumstances
of each case. In the present case the applicants for fishing rights
were required to complete a detailed
application form which
indicated precisely what information was required. It was
accompanied by instructions on how to complete
the form and
guidelines setting out in broad terms the considerations which the
decision-maker regarded as material for the purpose
of making the
allocations. An applicant would therefore have been fully aware of
the information that was required and on which
the allocations were
to be made. In these circumstances, the decision-maker, in my view,
was not required to explain in advance
exactly how the applications
would be processed. As Baxter
Administrative
Law
at
548 puts it:
"The
administration cannot be expected to share with the individual every
phase of its final decision-making process."
This
point, too, must fail.'
Accordingly
he contended that the first respondent had treated the assessment
for quality and functionality quite properly.
[64]
I do not agree, in my view
Scenematic
does
not lay down any hard and fast rule but instead implies that each
case must be dealt with on its own merits.
[65]
In this matter the nature of the tender and the information sought
from prospective tenderers gave them no particular insight
as to how
that information would be treated and more especially where any
particular emphasis would be placed. That this must
be so is
demonstrated in my view by the first respondent's own words when it
explained in its answering affidavit that:
'[tjhe
first and foremost consideration in awarding a tender is therefore
the capability and capacity - or perceived capacity
- of the
tenderer to successfully carry out the toiling and maintenance
operations. It is only if the tenderer meets certain
minimum
threshold requirements in respect of capability, capacity and
service delivery that they can be considered for the award
of the
tender, irrespective of the price quoted. It makes no difference how
cheaply the tenderer pitches his bid if there is
a perceived risk
that the tenderer, if awarded the contract, will not reliably be
able to carry out the tolling and maintenance
operations.'
[66]
At first blush that statement is indicative of a sensible approach
and innocent in outcome. However, it will not go unnoticed
that
perceived
is
employed twice in that explanation. To my mind there is no clearer
indicator that quality and functionality was in large part
processed
by subjective as opposed to objective analysis.
[67]
Much of the argument on both sides was devoted to a detailed
analysis of the evaluation and adjudication reports and how
those
documents treated the scoring on each of the elements and
sub-categories described above. I do not have to go that far
and
certainly do not intend re-scoring the tender. That is not my
function. As a general observation however, it is certainly
clear
that whilst some of the elements and sub-categories were treated
apparently objectively, a fair number were certainly scored
on a
subjective basis.
[68]
It seems to me therefore, that if the first respondent wanted to
assess and score quality and functionality on that basis,
and more
especially if quality and functionality was to serve a gatekeeper
function, objectivity, rationality and functionality
demanded more
clarity on how prospective tenderers could get through the gate.
[69]
The first respondent made repeated reference to the fact that the
second respondent (as an entity) has relevant previous
experience.
It was also acknowledged, however, that some of the key personnel
that the applicant intended employing to manage
and perform the
contract had some relevant previous experience. However, the
pre-determined classification of the various elements
and
sub-categories reveals a bias towards entity specific and
institutional experience as opposed to personnel experience. In
itself there is nothing wrong with that approach, but given the
constitutional importance placed on price it is, in my view,
important to tell prospective tenderers precisely how experience
would trump price and more importantly the subjective and objective
assessments that would be employed in that process. That was not
done here.
[70]
It seems to me that given the earlier reluctance on the part of the
first respondent to furnish the applicant with the relevant
documents, and given its initial reaction that price alone
non-suited the applicant, and given the manner in which price was
dealt with insofar as the applicant was concerned suggests a leaning
on the part of the evaluation and adjudication committees
towards
the advancement of the interest of tenderers in the position of the
second respondent, ie those who had previously been
awarded
contracts of this nature. That, in the context of this case, is
unfair.
[71]
So too, for the manner in which quality and functionality was
treated, the award to the second respondent falls to be reviewed
and
set aside.
THE
RELIEF
[72]
Mr
Olsen
argued,
if I were to find for the applicant, that any order I make ought to
be suspended for a period of time so as to allow the
first and
second respondents an opportunity to arrange their affairs. The
submission was made on the authority of
JFE
Sapela Electronics (Pty) Ltd & Ano v Chairperson: Standing
Tender Committee & Ors
[2004]
3 Ail SA 715 (C) where
HJ
Erasmus J
concluded
that:
'Setting
aside the decisions to award the tenders and declaring the resultant
contracts null and void will undoubtedly have disruptive
effect on
ali involved. On the other hand, a tender process which is in law
fatally flawed cannot be allowed to stand because
setting it aside
would have a disruptive effect. The disruptive effect can be
mitigated by suspending the coming intro operation
of the orders
made so as to enable the parties to make appropriate arrangements
for phasing out of work on the tenders, and completing
particular
facets of work which are incomplete.'
[73]
There is much to warrant that approach. In addition, by the time
this judgment is delivered only approximately one year of
the eight
year contract period will have elapsed. A significant portion
remains.
[74]
The following Order is made:
1.
The decision of the First Respondent to award the contract to the
Second Respondent for the Operations and Maintenance of the
N2 South
coast toil plazas KwaZulu-Natal, is hereby reviewed and set aside.
2.
The First Respondent is hereby directed to reconsider the award of
the contract in the light of this judgment, save that the
officials
who adjudicated the award of the contract referred to in paragraph 1
above are precluded from participating in the
reconsideration
thereof.
3.
The Orders in paragraphs 1 and 2 above shall come into effect on a
date calculated to be two months from the date of this judgment.
4.
The First Respondent is directed to pay the costs of the
application, such costs to include those incurred by the applicant
consequent upon the employment by it of two counsel.
VAHED
J
Case
Information;
Date
of Hearing: 6&7March 2012
Date
of Judgment: 27 July 2012
For
the Applicant: P J Oisen SC (with A V Voormolen)
Instructed
By: Cox Yeats Attorneys
Ref:
S Watson/07M717082
Tel:
031 536 3683
For
the First Respondent: B E Leech SC (with A J Boulle)
Instructed
By: Werkmans
Locally
represented by Shepstone & Wyl
Ref:
A F Donnelly/WERKI 7055.1
Tel:
031 575 7000